$CRUZ

DEFIANCE ETFs

Investment Case for CRUZ, The Defiance Hotel, Airline, and Cruise ETF

CRUZ, The Travel Reopening Trade. Invest in Cruise Lines, Airlines and Hotels

Covid-19 confined us to our homes for over a year. As countries struggled to control its spread, borders were closed, flights cancelled, cruise ships beached and hotels shuttered. Individuals suddenly had their liberty to travel, explore, experience and connect severely curtailed.

As vaccinations are rolled out and many governments are able to slowly dismantle protective measures, the trauma, frustrations and sacrifices of the pandemic could fuel a renewed thirst for travel. The desire to compensate for the restrictions of the past year with longer, further and more expensive holidays has become known as "revenge travel". The revenge is not against anyone in particular. It describes the visceral need to reconnect with distant family, friends and work colleagues, to satisfy the travel itch, to break out of the daily grind and discover new horizons.

Defiance's CRUZ ETF aims to provide next generation investors with exposure to the growth potential that we believe reopening and revenge travel represents. As people feel safer and world tourism begins to revive, companies that have seen repressed valuations could see strong recoveries. The pre-covid travel and tourism industry contributed $8.9 trillion to world GDP, and it has cost the sector an estimated $3.3 trillion. That's a lot of suppressed demand, notwithstanding the potential surplus consumption among some frustrated consumers.

Travel plans on hold

The travel industry, which accounts for 10% of the global economy, was largely put on hold from early 2020, when many countries froze arrivals and closed hotels, culture and entertainment venues. In the first 10 months of 2020 alone, the pandemic cost the tourism industry $935 billion in revenue worldwide.

For the USA, travel and tourism contributed more than $1.1 trillion to the USA's 2019 GDP with around 80 million international tourists. It then suffered the biggest single drop in tourism revenue as a result of the pandemic: a $147,245 million loss over ten months from the start of 2020.

In the cruise industry, the US Center for Disease Control and Prevention (CDC) ordered it to cease operations and world governments imposed sailing restrictions. Business meetings moved to Zoom and thousands of flights were cancelled.

2021 Reopening and Growing Confidence

The vaccine rollout, social distancing measures and safeguarding procedures have allowed a tentative reopening of the economy in many countries. The question of international travel remains, as it involves the mixing of populations and authorities need to protect passenger safety. However, it seems that the demand remains, albeit temporarily suppressed. If you take the UK as an example, only 10% of people said they would not rebook their cancelled travel plans once the corona restrictions were lifted.

Travel vouchers from cancelled trips in 2020 are beginning to expire, along with credit card points and airline miles possibly losing value. However, this would not be enough to get people back into the skies and seas in our opinion. This could come as a result of the coalescence of numerous factors: A vaccine rollout, greater availability and use of testing, better understanding and awareness of what spreads covid and how to stop it. The industry's adaptations to reassure travelers of cleanliness, hygiene and safety are also key. All of these together, combined with a growing frustration and unmet consumer need, is beginning to impact sales in the travel sector.

Carolyne Doyon, president and CEO of Club Med North America and the Caribbean, has noted that "Since the end of 2020, we were seeing a large increase in family reunion bookings for the 2021–2022 holiday season, with a 17% increase compared to the 2019 holiday season. This shows us that families are really looking forward to reconnecting after so much time spent apart and coming together for the holidays, as so many plans were canceled in 2020."

2021 Reopening and Growing Confidence (continued)

In the US, the cruise industry got a boost in May when the House approved a measure to temporarily lift the requirement for Alaska-bound ships to stop at Canadian ports. Canada has banned cruise ships till 2022 because of the pandemic, thereby preventing the reopening of the $160 million Alaskan tourist industry. The CDC has also eased restrictions for vaccinated passengers, allowing them to board without additional covid testing. A number of companies have renewed their ticket sales for vaccinated passengers and Royal Caribbean indicated booking volumes were within historical ranges for volume despite higher prices than pre-pandemic levels. CEO Richard Fain noted that it is not just the seasoned cruisers hurrying to book when possible. 80% of Singapore guest were first-timers, perhaps taking advantage of the relatively controlled environment and population on a ship. "So we're getting a lot of surprising data as things come out, and it's mostly positive," said Fain, whose company's shares rose after the release of its fourth-quarter results. For air travel, a recent Morgan Stanley report suggested that "the U.S. could return to pre-pandemic levels by late 2021 or early 2022." And a McKinsey report showed potential passengers' readiness to travel when their confidence is bolstered by a variety of means.

CRUZ – The Travel Reopening

Defiance's CRUZ ETF aims to capture the potential growth inherent in the reopening travel industry. It seeks to track the performance before fees and expenses of the BlueStar Global Hotels, Airlines, and Cruises Index, a carefully designed index of globally listed companies primarily engaged in the passenger airline, hotel, and cruise industries.

Companies in the Index must have a free-float of at least 10%, a market capitalization of at least US $150 million and a 3-month Average Daily Value traded of at least US $1 million USD. There are a minimum 25 companies in the Index, and a maximum weight for any single company of 8%. The index is reconstituted on a semi-annual basis and rebalanced quarterly.

Defiance ETFs aspires to bring retail and institutional investors access to cutting edge developments. The exact pace and dynamic of the post-pandemic reopening is hard to identify, which is why we believe an ETF with broad coverage of the travel industry could help investors benefit from sector growth while mitigating the risk of over exposure to any single company.

CRUZ Top Ten Holdings

• Marriott International
• Hilton
• Delta
• Carnival Corporation & PLC
• Southwest
• Ryanair
• Huazhu
• Royal Caribbean
• IHG
• United

as of 6/4/2021

Investment Case for CRUZ, The Travel Reopening Trade. Invest in Cruise Lines, Airlines and Hotels

Investing involves risk. Principal loss is possible. As an ETF, the fund may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index.

A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. Specifically, the Index (and as a result, the Fund) is expected to be concentrated in passenger airline, hotel and resort, and cruise industries ("Travel Companies"). Travel Company revenues are heavily influenced by the condition of the U.S. and foreign economies and may be adversely affected by a downturn in economic conditions that can result in decreased demand for leisure and business travel. Travel Companies may be significantly affected by uncertainty in travel, including guest safety, security and privacy, changes in labor relations and insurance costs, issues affecting equipment reliability and longevity, changes in fuel prices, and shortages of experienced personnel.

Beginning in the first quarter of 2020, financial markets in the United States and around the world experienced extreme volatility and severe losses due to the global pandemic caused by COVID-19, a novel coronavirus. The pandemic has resulted in a wide range of social and economic disruptions, including closed borders and reduced or prohibited domestic or international travel. Some sectors of the economy and individual issuers, including Travel Companies, have experienced particularly large losses. Such disruptions may continue for an extended period of time or reoccur in the future to a similar or greater extent.

The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. To the extent the Fund is invested in companies of a single country or region, local political and economic conditions and changes in regulatory, tax, or economic policy could significantly affect the market in that country and in surrounding or related countries and have a negative impact on the Fund's performance. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability, and these risks are magnified in emerging markets. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.

The BlueStar Global, Airlines, and Cruises Index (the "Index") is a global index that tracks the performance of companies that derive 50% (25% for current components) of revenue or operating activity from the passenger airline, hotels and resorts (excluding motels), and/or cruise industries. The Index is the exclusive property and a trademark of BlueStar Indexes®, a registered trademark of MV Index Solutions GmbH, and has been licensed for use for certain purposes by Defiance ETFs LLC.

CRUZ is new with a limited operating history.

Go to www.defianceetfs.com/cruz to read more about CRUZ including current performance and holdings information.

CRUZ is distributed by Foreside Fund Services, LLC.